Vehicle Leasing Glossary

On this page, we have briefly defined some of the concepts that are essential to understand when leasing a car or van. This includes a number of terms generically used in motoring as well as definitions specific to leasing.

Annual mileage

When leasing a car or van, the deal is partially calculated on the basis of how many miles the driver intends to travel yearly. Annual mileage is a reliable indicator of the likely condition and therefore value of a vehicle when it is handed back to the leasing company. Because of this, there are penalties for exceeding the agreed annual mileage. It is therefore important for you to accurately determine this figure: service documentation, sat navs and route planners may provide some insight. Any mileage over the contract is charged at the excess mileage rate charged in pence per mile. In certain circumstances, selected finance companies may also allow you to increase your annual mileage after 12 months.

Car Leasing

Car leasing (or van leasing) is an umbrella term for a number of agreements of a contractual and periodic nature. Broadly, in these agreements the person operating the car doesn’t own it, but they obtain its use at a reduced price. Typical examples include contract hire and finance leases. Some variations offer the opportunity to purchase the vehicle at the end of the agreement, such as in a contract purchase.

Find out more about what leasing involves, plus the different types of contract available to business and personal customers, on our how leasing works page.

CO2 Emissions

While it’s important to care about what effect we may be having on the environment, in an automotive context, CO2 emissions are important as – along with petrol type – they determine your tax rate. Low CO2 emissions can also provide exemption from the London Congestion Charge (with the Ultra-Low Emission Discount of 75g/km).

Contract hire

In a contract hire agreement, Nationwide Vehicle Contracts provides a vehicle for a determined period of time (contract term) and with an upper limit of how far they can travel (annual mileage). The customer pays regular monthly payments as well as a small initial deposit. At the end of the contract term, you must return the vehicle and can negotiate delivery of a new replacement model. ‘Contract hire’ typically describes the business leasing arrangement – private individuals may opt for ‘personal contract hire’ instead. The following differences may be noted:

If your business is VAT registered, up to 50% of VAT on the finance element of a contract hire can be reclaimed

Depending on the financial provider, personal contract hire agreements may include the option to purchase the car at the end of an agreement

Business leasing customers can enjoy extras such as outsourced fleet administration

Contract Purchase

This is an agreement where the user pays a monthly cost and initial deposit, with the option of returning, purchasing or trading in the vehicle at the end of the contract. The value of the car is set at the start of the agreement (the minimum guaranteed future value). As with contract hire, annual mileage and contract terms are also defined when drawing up the agreement. Contract purchase agreements are usually slightly more expensive because of their extra flexibility.

Contract term

Like annual mileage, the length of your contract determines the size of your monthly payments. Available terms are typically 24, 36 and 48 months.

Euro NCAP

The European New Car Assessment Programme is a commonly cited car safety assessment programme backed by the UK and other countries within the European Union. Assessment is not mandatory, though a high Euro NCAP rating is a good marketing tool. An overall rating is given, as well as separate ratings for adults, children, pedestrians and safety assist.

Fast Lease

Also known as the ‘fast delivery car leasing service’, this product makes popular stock cars available to customers within a matter of weeks. The cars offered through this scheme are brand new, but a narrower range of models are available and optional features are limited. Please note that the statutory cooling off period set by the finance company still applies to vehicles offered with the Fast Lease service. Stock vehicle flags are added and removed based on information provided by supplying dealers on a daily basis.

Finance Lease

A form of vehicle leasing contract frequently offered to limited companies, smaller businesses and sole traders. Compared to contract hire agreements, finance leases offer a 100% tax deduction to qualifying businesses (as opposed to just 50%). There is no option to purchase the vehicle, but it is possible to continue to pay to operate it.

Fuel Consumption

Nationwide Vehicle Contracts provides data on the number of miles you can expect to get to the gallon. Obviously, petrol is not provided within the leasing (or purchasing) price, so this is an important factor to remember when considering which car model you want to lease.

Insurance Group

Cars in the UK are placed within one of the fifty insurance groups. The groups are intended to be in ascending order of cost: a sports car is more likely to end up in band 50 than a Vauxhall Astra. The main variables that determine placement are:

Damage and parts costs

Repair costs and likely timing

Value of vehicle when new

Performance

Safety features

Note that some insurers ignore these recommendations and calculate premiums on the basis of their own data.

Lease Purchase

A lease purchase involves paying the full purchase price of a vehicle, spreading the cost out over several months of manageable payments, with initial and final lump sums. Many of the benefits of other lease deals are not available, and the vehicle cannot be returned once paid for.

Manufacturer OTR (On The Road cost)

Nationwide Vehicle Contracts states the Manufacturer’s On The Road price for ease of comparison with the available leasing deals. The On The Road cost is usually inclusive of tax, delivery charges and road licences.

P11D

Form P11D is a standard UK tax form for all employees earning over £8,500 a year. Section F deals specifically with cars and car fuel, while section G deals with vans. These come into play if an employee is given a company car as part of their benefits package. Nationwide Vehicle Contracts includes a P11D tab on its model pages, stating the amount of tax that must be paid. This figure varies from year to year and depending on your tax liability bracket.

Personal Contract Hire

See contract hire. As the name suggests, personal contract hire is a form of contract hire agreement designed specifically for personal customers.

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